On August 1st, the
FRC announced the dropping of its probe into the failure of BAE Systems’s
auditors, the notoriously useless KPMG, to raise the alarm, question, or
do anything at all about the massive commissions (= bribes) that its
defence industry client was liberally handing to individuals and shell companies
to smooth the path to the historic al-Yamama deal. The FRC’s excuse for
dropping its three years probe? Apparently it would have meant delving too far
back into the past. Of course, it didn’t mention that seven current and former
KPMG partners and executives are among the FRC’s board directors and senior
staff, including the likes of Peter George and Sir Steve Robson – so no
conflict there, obviously..."

Ian goes on to identify how "...the background to this
is that the FRC launched an “investigation” into KPMG’s role as auditor and
adviser to the London-headquartered defence and aviation giant in 2010, after
BAE settled corruption probes in the US and UK. The FRC investigation was,
perhaps conveniently, focused on audit and advisory work carried out by KPMG
between 1997 and 2007. BAE Systems — farcically – settled with the UK’s
Serious Fraud Office by admitting to a minor accounting charge relating to its
activities in Tanzania, for which it paid the modest penalty of £30m. Tony
Blair’s government was lampooned and lambasted as wilfully blind to corruption
seven years ago after it successfully persuaded the SFO to drop its
investigation into the al-Yamama deal on the grounds of “national security”..."

What this coruscating
critique of an important regulatory body demonstrates so clearly is that the
United Kingdom has become a regulatory banana republic when it comes to
investigating the affairs of the powerful!

What has become very
clear in recent years is that there are two distinct levels of engagement when
criminality is concerned in the UK.

When it affects the
lower classes or those whom society can afford to marginalise, then the
requisite level of intervention can and will be sanctioned. People will be
arrested, charges brought, judges will pronounce in magisterial tones and the
prisons will welcome another hapless guest.

When it has some
impact upon anyone in what could be termed 'the powerful class' for lack of a
better phrase, then an alternative agenda can be observed. Investigations take
longer and longer until it is felt that too much time has elapsed for a safe
prosecution to be brought, as in the BAE case above! Alternatively papers can
get lost (it's amazing quite how often this can happen)!

If you have any
doubts about this assertion, examine the vast amount of organised criminality
that has been committed by the big banks in the form of theft, fraud, money
laundering, market manipulation, drug trafficking, sanctions busting et al!

Has any one director
of any of these institutions been prosecuted or brought to book for these
crimes which now amount to many billions of pounds worth of criminality?

No, of course not,
and this is all part of a British disease which has infected the body politic
and which will, in turn, demean our public standards to such an extent that we
will become the laughing stock of the civilised world, (if we are not already
in that category).

There is something
pernicious about the way in which the British insist that their public life is
regulated and governed. We are a nation capable of maintaining so many
conflicting standards of probity while sensing no distinction between them, it
marks us out as a country which is able to juggle levels of hypocrisy which
transcend ordinary examples of mendacity.

I first encountered
this when I helped to investigate the affairs of a commodity brokerage which
had gone into liquidation at a time when this country had exchange controls.
Its clients were all very wealthy British investors from an overwhelmingly
upper-class background. They were in fact engaging in massive tax evasion,
fraud and money laundering by siphoning money out of the country to anonymous
Swiss accounts via a series of spurious futures transactions.

When the whole scam
was uncovered and their names were in danger of getting into the public domain,
the Director of Public Prosecutions suddenly saw fit to announce that there
would be no prosecution of anyone involved in the case on the grounds that it
was not in the 'public interest.'

This phrase has
taken on the same absence of veracity as the phrase 'national security'! Both can be trotted out at any moment and can
be used to obfuscate a multitude of sins, and are equally unbelievable!

So a sector of the
British public were protected from the implications of their wholly criminal
conduct, purely because of their class, and the influence they were able to
exert at the highest levels of national authority!

It is this element
of 'influence' that so permeates the culture of our national psyche, and which
makes us so susceptible to pressure from above. In the case of public servants,
the influence of the number of putty medals, awards, knighthoods, ribbons, and
other pieces of pointless frippery, permit a level of adverse influence far
outside their normal expected range, to be applied.

Any civil servant
knows that if they are to successfully receive their gong, they must toe the
line. Stepping outside the accepted standard of acceptable behaviour is a sure
and certain way to ensuring that your honour does not arrive!

I saw this so
clearly when I had occasion to challenge a man called the Ombudsman, otherwise
known as the Parliamentary Commissioner for Maladministration. I had referred
an investor case to the Ombudsman in a case where the investor's investments
which they were paying to the crooked adviser, were going straight into the
coffers of the Inland Revenue who were squeezing the man hard for unpaid
revenues.

He should have been
closed down for his fraud, but every time the Government Department responsible
for acting against him for fraud suggested moving against him, the Revenue
vetoed the suggestion on the basis that he was coughing up unpaid and otherwise
uncollectible revenue, so he was allowed to continue trading.

Perhaps unsurprisingly,
I thought this was unconscionable behaviour on behalf of the Revenue and I referred
the matter to the Ombudsman. I had previously been successful against
Government Departments by using this referral tactic, so I was perhaps not
surprised to find that the old Ombudsman ( a fair-minded and judicious lawyer)
had suddenly been supplanted by a former Civil Servant, who again, unsurprisingly,
found no maladministration.

I wrote some fairly
scathing articles about this individual in which I pointed out his
investigative failings. He wanted to sue for defamation, but it was pointed out
to him that should he do so, and the court find that he had not acted
judiciously, (which was a possibility), that it would mean the end to any hope
he might have had of any kind of putty medal. So he chose to keep quiet instead
and had to wait a while longer for his award. If I had got my way he would have
received nothing at all.

My point is that it
seems to me that there are far too many ways of influencing the decision making
process in the UK in ways which are not necessarily in the public's best
interest.

The Royal family can
be an unconstitutional influencer of policy. I am not talking about the Queen
who has a constitutional right to advise and guide, and who in every other way
is punctilious about the use of her powers, no I am talking about some of the
lesser members of the family.

Ian Fraser points
out the undue influence of Prince Andrew.

"...You may
remember that a few years ago it emerged that a “cocky” Prince Andrew appeared
to welcome and endorse bribery and corruption — or at least that he
abhors those who would seek to get in its way, including anti-corruption
regulators and investigative journalists (by the way, we only know this thanks
to the efforts of the recently convicted U.S. army private Bradley Manning, Wikileaks
and The Guardian).

In an October 2008
U.S. embassy cable Tatiana Gfoeller, the U.S. ambassador to Kyrgyzstan,
revealed that during a 2008 engagement at a hotel in the central Asian
republic’s capital, Bishkek, a “rude” Prince Andrew — who for some inexplicable
reason is a UK trade representative — attacked the Serious Fraud Office for
what he called “idiocy”.

In the
cable Gfoeller wrote: “Rude language à la British … [Andrew] turned to the
general issue of promoting British economic interests abroad. He railed at
British anticorruption investigators, who had had the ‘idiocy’ of almost scuttling
the al-Yamama deal with Saudi Arabia.” The prince, she explained, “was
referencing an investigation, subsequently closed, into alleged kickbacks a
senior Saudi royal had received in exchange for the multi-year, lucrative BAE
Systems contract to provide equipment and training to Saudi security
forces”. The dispatch continued:

“His mother’s
subjects seated around the table roared their approval. He then went on to
‘these (expletive) journalists, especially from the National [sic] Guardian,
who poke their noses everywhere’ and (presumably) make it harder for British
businessmen to do business. The crowd practically clapped.”

Whether we like it
or not, a very large percentage of the British people like being seen in the
company of members of the Royal Family, even boors like Andrew who seems to
feel that he has some God-given right to be rude and offensive in public, as
long as it is in the interests of 'British Trade'. We do well to remind
ourselves of Dr Johnson's famous epithet that 'patriotism is the last refuge of
the scoundrel'!

As Ian Fraser
identifies; "...What I find disturbing is not just the behaviour of the
oafish Andrew, it is that many of Britain’s regulators seem to share the Prince’s
views. They either welcome corruption and collude with corrupt companies to
help them cover up past wrongdoing, or are simply too lazy or frightened to
bother tackling high-level fraud and corruption..."

We could easily say
the same about financial regulators who find it so much easier to dish out
fines for wrong-doing, all of which merely dilute the interests of the
shareholders, than to take a principled view and bring criminal prosecutions
for wrong-doing.

In fact, things have
got to such a state that we can assume that as long as the institutions which
reflect the interests of the powerful are subject to the present laws and regulatory
oversight, there will be no interventionist activity which will threaten the
interests of those in charge.

We are now a country
where as long as you can have people of influence on your board, former senior
civil servants in particular, you stand every chance of walking away from any
allegation of wrongdoing.

What message this sends
to other countries is anyone's guess. Presumably, when it comes to more
lucrative arms deals with dubious Middle Eastern potentates, the bribes will
continue to be paid, and British representatives will continue to receive their
share of the largesse, secure in the knowledge that their accountants will not
discover these payments in the accounts and the country's prosecutors will be
leant on by the politicos if it all looks like coming unravelled.

3 comments:

Another really good piece Rowan. I too remain incensed by the constant spin which would have us believe the UK is healing when it is instead over-run with those who prefer willful blindness, rewards for failure and honours for keeping quiet.Firmly believe a system which condones fraud, embraces corruption and rewards failure is nothing short of gangrenous and a long way short of healed. Wrote this in disgust. http://lifeafterdebts.blogspot.co.uk/2013/08/socially-useless-banking-regulation.html

Thanks Rowan. It is real service you and Ian are providing. Please keep them coming as it is vital the public are regularly told their leaders have feet of clay and that corruption is not only rife but routine. Whilst I don't expect a turnaround there is a real prospect that a new government will be elected and if there is a sufficient vote of 'no confidence' in the old order then change will come. Meanwhile we all have to take a few risks and name and shame the offenders. It is my guess they won't use the courts in seeking to establish their innocence. Speaking personally I would relish the opportunity for a day in court if only to watch someone who I had allegedly defamed try and justify their position. So please keep naming names and indeed whole sectors of commerce that are routinely engaged in malfeasance. For example, is there hedge fund that doesn't indulge in insider trading as how else can they explain their claim to 'beat the market'. The market, by definition CANNOT be beaten. Ashley

Nice piece. We are living in a social environment that is becoming a shallow money driven veneer. It's all about the money. All about consumer goods all about flash. Money is legitimacy. However it came about.

The benchmark of success in contemporary British, particularly English Home Counties society is quite simply having money. Possession of money, being able to flash it around, spend it and buy stuff - is what is needed to get recognition at every level of society. Doing stupid things to earn money is a completely acceptable pastime because there is money at the end of it. Money confers celebrity on anyone who has it.

IF you have money you are automatically, unquestioningly worthy of wide admiration... people who have money are looked up to from all positions on society as being successful. People with money are people to be respected, listened to and taken notice of. No matter what crap they utter, they are taken seriously. Often the more blullshit they spout the better it is for the news stories about them. It's the same with corporations as well as individuals.

It's perfectly acceptable for a company to trade insolvently as long as it's cash rich. Pre pack administrations are popular at every level of business as long as there is cash flow to dip into and swim in once the debt has been removed.

If you have money it is assumed you are smart. If you got your money by devious means, by stealing from the state or from other people on a large scale and you got away with it - through manipulation of stock options, no matter, it's OK as long as you have it.

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!